Don’t Tune Out the Health Care Debate

A health insurance policy with a pen for signing the papers. Photo courtesy of Shutterstock.

During the past six months, health insurance has earned a dismal political reputation because of the firestorm over the Affordable Care Act. But regardless of how polarizing the discussion has become, you should pay attention to it. As a college student or recent graduate, your role and responsibility regarding health insurance could soon change, and you could find yourself facing some important decisions.

Health insurance, or lack of it, can profoundly influence your well-being – physically and financially. No matter what side of the debate you fall on, you’ll need to make some choices in 2014. We’ve winnowed the process down to three steps to help you:

Step 1: Get covered

Before the government fully instituted the Affordable Care Act in 2014, Americans could choose not to purchase health insurance. Now, most people must purchase at least the most basic coverage or face a tax penalty. The good news? Government subsidies and regulations have made certain types of insurance more affordable and available.

Though the constant political back-and-forth might make health insurance seem like an abstract political concept, coverage can make a concrete difference in your life. Consider the following two examples:

• In 2012, the average non-vital ER visit cost $1,233, according to The Washington Post: That’s 40% more than the average monthly rent in the U.S.
• The average cost of a day spent as an inpatient at an American hospital is $4,000, according to The New York Times.

Do you have that kind of cash readily available? Don’t risk surprise financial ruin by leaving your healthcare costs to chance.

Step 2: Weigh your options

As a college student or recent graduate, you’re young, probably healthy, and therefore a perfect candidate for coverage. Consider your options carefully, as each has its pros and cons.

• Your parents’ health insurance plan: If you are currently unemployed or a full-time student, remaining on your family’s health insurance plan is probably your best option for now. Thanks to the ACA, you can remain on your family plan until age 26.  With this coverage, your parents pay, but you have certain restrictions regarding convenience, independence, and choice. You will eventually be required to purchase your own health insurance plan, so if you are currently employed, consider purchasing your own plan. In fact, if your employer offers health insurance, you cannot stay on your parents’ policy.
• Employer health insurance: Congratulations, you have your first entry-level job! Now take a look at your employee benefits. Employer health insurance, also called group coverage or group health insurance, can be a real perk. With this type, your employer chooses a health insurance provider and certain plan options for you and usually pays part of the cost. In general, these shared costs make group coverage less expensive for you. Employer coverage, however, is dependent on employment and less flexible than that of individual plans.
• Individual or family health insurance: Anyone can apply for individual health insurance, and the ACA now offers government subsidies in many cases. Before the law took effect, individual coverage typically only represented the best option for the self-employed or small-business employees. Now, however, individual plans have become more affordable for all those who do not wish their coverage to be dependent on employment (such as those with little job security) or those who want to tailor their plans to fit them. Though individual plans remain slightly more expensive on average than group plans, they could better fit you. Find out if your state has a state-run health exchange or if you should shop on the federal exchange. Either way you will have an array of plan options available to you.

Step 3: Know the important terms

Keep yourself from becoming lost in political or technical jargon by familiarizing yourself with some common insurance terms. Even with the most general insurance knowledge you can at least keep up with the conversation.

• Premium: This is the monthly amount you pay to maintain health insurance coverage. Your premium does not include the amount you’ll pay for certain services or co-payments (out-of-pocket expenses for doctor visits or prescriptions).
• Deductible: This is the amount you pay out-of-pocket for healthcare services before your insurance kicks in. Typically, the higher your deductible, the lower your monthly premiums. Nonetheless, never set your deductible so high that you can’t pay it in the event of an emergency.
• Indemnity versus managed-care coverage: Whether you purchase group or individual health insurance, you also choose between two types of coverage: indemnity versus managed care. Indemnity or fee-per-service allows more flexibility because you can choose any doctor for your services; indemnity also typically involves higher overall costs. Conversely, managed care pairs your health insurance carrier with certain healthcare providers to provide discounted rates, which limits your healthcare provider options.

As a young, healthy student or recent graduate, purchasing insurance now can set a good foundation for the future. Avoid the sometimes devastating cost of health care by protecting yourself now for the road ahead, and you could see fewer obstacles on your journey into adulthood.

This article was written by Katherine Wood, contributor to the HomeownersInsurance.com blog. HomeownersInsurance.com is a resource center for insurance consumers and homebuyers across the country.